That step, agreed on with the International Monetary Fund and the 16 other countries that use the euro, marked the first time in the three-year-old debt crisis that large deposit holders - wealthy savers, businesspeople or institutions - will be forced to take losses as part of a rescue.
The move was hailed later Monday by Jeroen Dijsselbloem, head of the Eurogroup of euro finance ministers, who said forcing losses on banks' shareholders, bondholders, and even large depositors could become the template for future rescues.
By Tuesday, however, Benoit Coeure, a member of the executive board of the European Central Bank, bluntly dismissed Dijsselbloem's idea, saying Cyprus' situation was unique because of the island nation's outsized financial sector, including large deposits from foreigners.
At a Paris news conference with visiting Spanish Prime Minister Mariano Rajoy, French President Francois Hollande agreed, saying, "What is really important regarding Cyprus . . . was the exceptional, specific, unique treatment and which, nevertheless, had to be done."
Gunnar Hokmark, a leading European Parliament lawmaker from Sweden, further muddied the waters Tuesday by calling for the enforcement of losses on big savers to be enshrined in law in cases of bank failures. Deposits of up to 100,000 euros are guaranteed by a state-backed deposit-insurance scheme.
Dijsselbloem's remarks raised the specter the solution might be applied elsewhere in Europe. His comments spooked markets and sent the euro to its lowest value against the dollar since November.
"Anxiety spreads when key European leaders make such statements," said Erik Nielsen, an economist with Unicredit bank.
On Tuesday, Cypriot businesses were under increasing strain to keep running after financial authorities stretched the country's bank closure into a second week in a harried attempt to stop depositors from rushing to drain their accounts.
All but two of the country's largest lenders had been due to reopen Tuesday, but authorities extended the bank closures to give officials more time to initiate a major overhaul of the banking sector and devise capital controls to limit the amount of money that can be taken out of accounts.